One of the first things I learned as a graduate student at Northwestern’s Integrated Marketing Communications (IMC) program 20 years ago and years later as a teacher in that same program was the value of a brand. Managing a brand is so important people earning college degrees focused entirely on how to protect this important asset. A brand like McDonald’s is much more than its golden arches however, as Apple’s is more than its intriguing white fruit logo.
While a brand is really an intangible, its value to any successful company is immense. In the most simple of terms, a brand is really all about a company’s reputation in the marketplace. How reliable are its products? How clever are employees at developing fresh solutions to old problems? Just as important is the faith a corporation’s name conjures in the minds of consumers ready to hand over their money. Would iPod’s have become household words if Apple had turned their back on customers when a unit failed? Not a chance. A brand then is everything a company does that makes consumers return for more … the employees, the products, the service. Screw any of these up and the brand’s in peril.
Case in Point
Hawker Beechcraft’s troubles aren’t new since the 90-year old aircraft builder’s been wallowing in Chapter 11 bankruptcy since May. No surprise that investors Goldman Sachs and Onex wanted out after struggling with HBC’s $2.5 billion debt, but when the Chinese deal with Superior Aviation fell apart a few weeks ago, on the eve of the industry’s biggest show at NBAA in Orlando, Hawker was trapped between a rock and a hard spot.
Reinventing Hawker seemed like a no-brainer to management, even though that meant dumping the Hawker jet line, including the HS-125 series, an SUV of an old airplane. At NBAA, Hawker announced a corporate turnabout that calls for the company to focus on single-engine aircraft – including a yet-to-be green-lighted single-engine turboprop – as well as the tough old King Air line. With no new Hawker jets rolling off the lines in Wichita since last spring, the new Hawker 4000 and the Premiers are also DOA.
The jets? Well, stuff happens. But a single-engine turboprop? An interesting idea unless you believe the announcement might have been to take everyone’s eye off what else was happening at Hawker.
Not long after last spring’s bankruptcy announcement came the story of a number of Hawker’s top brass maneuvering for over $5 million in bonuses as rank and file Hawker employees lost their jobs. In August however, an outraged bankruptcy judge said no to the effort. Then a few weeks ago came a stern scolding from a U.S. bankruptcy trustee that way too much of the $12 million Hawker spent in bankruptcy court legal fees was aimed at figuring out a way to land those darned executive bonuses … the same fat paychecks that judge told executives to drop in August. Guess they didn’t get the memo.
The final nail in the Hawker coffin though was the NBAA announcement that bankrupt Hawker Beechcraft was dumping its warranty responsibility on the Premier 1a and the Hawker 4000 jets. Hawker asked for, “permission to cancel certain warranties and factory-sponsored programs, including our guaranteed maintenance program SupportPlus and the Hawker 4000 upgrade and enhancement program.” If the court approves the move, HBC will continue the warranties on a few Hawker jets — the 750, and the 400 XP and 900XP.
But the damage is already done, even if the court refuses the petition.
A company with managers who care more about themselves than about their employees or their customers is already dying on the inside. Single-engine turboprop? That’s a smoke and mirrors project. Would you trust this once great company any longer? It’s no wonder they couldn’t sell it.
Beech Aircraft and its employees built some of the best airplanes in the world, thousands of which are still flying. I’m proud to have “HS125” stamped on my ATP certificate. Now this company’s management has become an industry embarrassment. Inside one of my old Beechcraft sales training manuals from the late 1970s, I found this quote … “Beech Aircraft Corp., a tradition of excellence.” That really is history isn’t it.
Rob Mark, Publisher
A sad state, Robert. My first turboprop experience was thirty years ago, attending BE-200 initial at the old Beech Training Center. The 10 day initial included a luncheon with Beech execs. Though she didn’t make ours, rumor had it Olive Ann was a regular attendee at these. I hope we can, one day, return to the proud days of the “Beechcrafter”.
Brilliantly stated definition of a brand (as your former teacher)at Northwestern. As my flying instructor I bow to your knowledge of each aircraft we see at Chicago Executive.
I had the pleasure of working for a privately owned Hawker Beech store in the mid west from 2004 through May of this year. Rob you nailed it, I watched “HBC” Wichita unravel in the last four years upper management was and is completely incompetent to customer service and most other very important support functions. My biggest frustration was how do these people get in to these upper management position and able to stay, they are to stupid to understand who they are but they destroyed what was left of Hawker Beech. Using the word Stupid may seem harsh but in this case its a perfect fit.
Great article and very sad to see such a great brand hit the skids like this – My guess is it has been coming for a long time. Sadly, as you point-out, it will be a brand of our memories, mine included. My first plan flight as a small child growing up in a Australia was on a Beachcraft. Even sadder that they brought this on themselves, no one else can be blamed for this, but themselves. Thank you for the article.
I feel somehow they need to get back to their roots, similar to Cessna.
Honestly, I think stupid is being kind to these guys. I was stunned when I heard they still wanted their bonuses as the company went into Chapter 11. Stubborn pig-headed selfishness right there, folks.
Single engine turboprop? Yeah right. Tell that to the next 400+ people they’ve announced plans to let go (http://www.aviationpros.com/news/10826658/hawker-beechcraft-plans-to-cut-about-410-jobs)
These guys are starting to make airline execs look good (almost :)
Robert, good for you for exposing them.
Yes, it’s too bad that Beechcraft was unable to maintain competent management. Lot’s of rookies and job hoppers, but the experienced wise leader has been missing. In recent years, I find myself frustrated when speaking with HBC employees, as they tend to lack knowledge of the company and its products. Unfortunately, it’s not uncommon with public companies. When Beechcraft was sold to a public corporation, that marked the beginning of the end. It just took a long time to spiral down to the critical point.
I personally think it all started when the “takeover artists” paid an insane price for an aged line. I don’t remember what the $ # was, but do recall stopping in the grocery store parking lot and saying “WHAT?????” to the radio when I heard it.
Too much debt, too many MBA’s, too old a product, too few innovations and purchased right at the top of the market.
And this was the company that brought us the Staggerwing?
A pox on all those who had a hand on the rudder of this once-proud company.
Shall we use names? Boisture came in, fired all of the long time Beech marketing people who had been very successful at building the brand for decades. He hired his own friends headed by Shawn Vick. They created two tiers of employees and compensation. In the process they alienated many of the people who had spent decades of sucessful careers there.
Besides raising the operating costs fo the company, Boisture’s new team could not reproduce the sales successes of the people they replaced. Granted, the overall market was in crisis, but the new and more expensive management team was more motivated by taking cash out of the company than anything else.
Asking for retention bonuses from the bankruptcy court took a lot of guts. But given the caliber of people who asked for them, is it surprising?
Then one week ago at NBAA, Boisture touted the new “Beechraft” with no money to pay for the new projects. If the company is to survive, the investors who have been left with what little value remains, need to get rid of the stooges that got Beechcraft into its current fix.
I have owned in the late 80’s a Hacker 125 before Beech bought, it was a fine fuel sucker and rock solid. Now I own Beechcrafts’ for the last 15 plus years, they are the finest cabin class aircrafts, workhorses without comparison, Cessna could not even come close to the quality of a Beechcraft. Now comes the real problem with not only Beechacraft but with too many companies that our so called finest, the VCs’ and Investment Bankers buy, overpay and overload them with debt, etc and worst they are putting ” garbage” managment in place that has 0 values, the only value they bring is to get fat paychecks, bonuses etc, for 3rd class executives who could not make it a day as a business owner, thats’ the problem, we need to get back in what we are best, run our own companies and say good bye to VC’s Investment Bankers and others who have no knowledge how business really works. I have seen over the last 25 years how greed has destroid to many fine companies.
When Steve Miller & company were “employed” to turn around HB, I knew the bonus scenario was coming. It’s their MO with every company Miller has been “associated” with. Unfortunately, he and his henchman were foiled this time. As usual the loyal and dedicated employees that built and maintained the brand are the first to feel the pain of “stupid” management. Definitely is a sad state of affairs.
Just a note on the management bonus issues. In any bankruptcy the stake holders and debt holders usually are the ones pushing for bonus money to management to stay through the end.
If in bankruptcy, and management starts taking other job offers fearing the worst, then this becomes a self-fulling prophecy and there is little hope to make it through, or to get the best money of it is a liquidation.
However, having said that, when there is really no other market to go to then perhaps the bonus issues, in our economy, are not a good idea.
Let’s hope that some investor(s) out there will still see the value of the Beechcraft Beech part of the business and if the bankruptcy court can arrange a spin off with outside financing, keep this baby going. Have flown a number of Beech piston products from the K-35 through the A-36, they represented what quality control was all about.
And as far as the Hawker execs trying to suck all that bonus money out at the end, it reminds me of the same greed pictorial PanAm showed at the end. Took some guys two years to get their vacation pay after the execs were busy writing themselves quarter-million dollars “bonus” checks.
jjd
This is a true tragedy.
I was 11 years old, back in 1955, when I accidentally called the local Beech dealership one afternoon on a random dialed prank call. Not know what to say, I said I was doing a school project and would appreciate any information they might have.
The representative who answered sent me color brochures, price lists, and equipment lists on the Bonanza, Twin Bonanza (the forerunner of the Queen Air and King Air) and the magnificent Super 18!
I was totally enthralled with the planes and soon had drawings of the entire Beech line covering my bedroom walls.
Walter and Olive Beech seemed to be a set of idealized grand parents who manufactured these wonderful “Cadillacs of the air.”
The decline and seemingly imminent death of this great company feels like I’ve lost part of my home. It’s just really sad.
Rob,
Good article, but a bit harsh. You stated that you were proud to have “HS125” stamped on your ATP certificate. I’m sure that the Hawker is a fine aircraft…just not for Beechcraft. The HS125 was a huge part of their problem. It caused them (Beech) to “take their eye off the ball”. It had been tried years ago and dropped…only to be resurrected by Non-Beech management implants years later. Clearly a mistake the first time, only to be proven as such again 20 years later. Back in the late seventies and early eighties I was fortunate enough to be a King Air Sales Manager for a Midwestern Beechcraft distributor. The loyalty and pride that seemed unshakable by every employee and customer was awesome. I was blessed to attend and sit by Mrs. Beech at several of those luncheons and I can tell you that once she was disrespectfully ushered from “Mahogany Row” by the Lyndon Blue era…things were never the same. Many of us said that the Star Ship would never be embraced. And where is it today. I believe that with the right group of investors and focus on the old Beechcraft principles (roots). Not only is a single engine Turbo-Prop in their future…but any plane that’s rooted in the integrity of the King Air will only speed the recovery of one of the greatest general aviation airplane manufacturers of all time. Even in this economy, I have no doubt what-so-ever, that a Beechcraft built from the uncompromising principles, pride and integrity that Mrs. Beech expected and demanded would be amazingly successful once again. All you’d need to do is go round up a bunch of Ex-Beech folks that were there when Mrs. Beech was there. Then listen, watch, implement and enjoy the re-birth of a new Beechcraft. And, the new owners would smile all the way to the bank!
This is not unique, I work for American Airlines as a mechanic. Haven’t had a raise for the last decade. While the execs keep getting there bonuses and benies. We are basically just working for an hourly wage. They just can’t wait to send all there maintenance overseas. Been with them for 26 years, and we’re all about done. great ending. This is the new America, this last election spelled out which way America wants to go. So be it, we get what we deserve.
Get back to their roots like Cessna? Beechcraft roots are based in value: airplanes that provided quality and performance above the competition in a package that tens of thoussands of people could afford. Both Cessna has there roots in airplanes that were simple. The bottom line is that the entire industry has lost sight of what “affordable” means, rationalizing instead of realizing that they have created products fewer and fewer people can afford. Cessna has survived by focusing on products targetting a tiny but high margin market, as has all the GA industry. Think about the size of the bizjet market – if two companies change their mind about buying a new jet it has a signficant impact on the years totals. So the biz swings like a windsock.
If Beech comes out of bankrupcy, a lot of employees will still lose their jobs and a lot of customers will get screwed on support. If they don’t, then all the employees lose their jobs and all the customers are screwed on support. Neither is very attractive, huh. Is this sounding a bit like how we fill our elected positions in this country?
The request for bonuses was outrageous, and wisely denied by the Judge. That should be on the show “American Greed”.To think they deserved a bonus for managing the company into BK was absurd.
Regarding brands, the heighth of arrogance and stupidity was when Raytheon bought Beechcraft and discontinued the use of the name “Beechcraft”. At least the new owners had enough brains to revive it.
Goldman Sachs strikes again! Beech has been saddled with the enormous debt that Sacks incurred to buy them. Can’t be very innovative with a million dollar debt payment due every month.
Bet all these managers clawing tooth and nail to get their golden parachute bonuses while the company that gave us such great planes as the Bonanza, King Air, and Baron goes down the tube are all card caring members of the 1%!!!!! Not trying to get political but really, a great company dies and all they care about is leaving with 6 and 7 figure bonuses!!!!
The people who need to own this company are the members of the American Bonanza Society. This makes complete sense to me. Think about it… in 2010 Hawker did $2.4B of which $891MM was propeller driven aircraft. Of that, only $30MM was piston aircraft… about 1.3% of total sales. The Bonanza it could be argued, is the best airplane ever built but how can you
The people who need to own this company are the members of the American Bonanza Society. This makes complete sense to me. Think about it… in 2009 Hawker did $2.4B of which $891MM was propeller driven aircraft. Of that, only $30MM was piston aircraft… about 1.3% of total sales. The Bonanza Society has the expertise, the money, the market but most importantly, they understand the Bonanza owner. I know. I sat on the Board from 2008-2010 and headed up a 700 man-hour research study aimed at understanding our market base.
A great set of responses to this VERY sad situation. I bought and flew an M-35 for 12 years all over this great country putting my trust in that wonderful machine at night, over the mountains and in wx from coast to coast to the tune of 3,500 hours. To see it flounder over the past few years has been heart rendering. The Bonanza was at the time in a class of its own as was / is the Staggerwing. I met Olive Ann and Louise Thaden at the dedication of the museum in Tullahoma TN. At least I have good memories in spite of what has been going on with the company over the past years.
I fully agree that the ABS should own the outfit now and with their dedication it could be a going concern again. I would encourage the development of a Vision look-a-like or to buy the rights to it as it is clearly the “New Bonanza”, single engine, turbine and would be the most affordable business jet on the market bar none.
SPOT ON, Robert!
What a shame. I can see if they were putting out a bad product, but this is not the case.
I’ve been trying to figure out how to jump back into this conversation but there has barely been a chance to get a word in edgewise.
I sat through a bankruptcy at the Original Midway Airlines and recalled asking a “really dumb question.”
“If this bunch of management got us into bankruptcy, why should we think they’ll be able to get us out?” Turned out I was right.
But let’s be serious, there are companies as some of you have mentioned here that make a living off the debts they run up.
How in the world do these people sleep at night?
It’s as if this is the Wall Street movie come to life. So where’s that good old Bud Fox character — a guy with a soul he didn’t realize he had — a guy who finally says enough?
Rob
Corporate Office Greed
Just read that American Airlines is again seeking to terminate defined benefit retirement plans for the rank and file. They want to pass the liability on to the government.
I’m just curious, does the termination of these retirement plans reach up to the corporate suite as well?
Sounds like a good old Bain deal ..Jazz up the public with a new prospectus (plane) raise financial investments and then bail with the money…ship whatever is left overseas and take bonuses for good
executive management. Its legal, of course.
Keep an eye on those ‘managers’ & keep reporting their future behaviours as a service to fellow professionals. Help them to retire.
Beware if any of them become invloved in a company you work for.
Greed is not good, obviously their parents did not tell them the story about “Killing the Golden Goose”.
From someone who used to love flying Hawkers.
This is really too bad. My flying club owns a Beech and the AOPA sweepstakes plane for next year will be a nice Debonair. I’ve always thought that I’d own a nice A36 Bonanza or G58 Baron (depending on how big that lottery ticket ended up being), but now I’m not so sure… can the brand be trusted? Will future workers have the knowledge or do as good a job as past workers have on these aircraft? Will the company be around to support them? Good question, good story.
Your critique of the management of Hawker Beechcraft is not on the mark. Not at all. The fate of the jet business of HB was sealed long before the investment bankers plowed hundred’s of million into and before the current management was on site. The business of business jet production is about big, big gambles to develop low production rate aircraft that are laser targeted at a very fine segment of buyers with massive development costs spread over common development, engineering, production and marketing. Citation and Gulfstream are the masters. No one else comes close. Raytheon Beech doomed the company by acquiring legacy jet aircraft from Mitsibushi, British Aerospace and Beech. Nothing common and nothing originally designed in the last 16 years. The base airframe for the Hawker family of 700 and on was designed in 1985 and the Premier was designed by a company that knew prop planes, not jets and they chose to initiate a radical shift in fuselage structure. The Hawker line then and now does not have a product in the hot compact, super light or large biz jet category. They have the antique 400xp and the unique Premier 1A competing against the CJ2 thru 4’s plus the Lear 70 & 75’s in the small cabin category. Virtually all of the remainder of their line up is in the mid-size category competing against the XLS, Legacy 400, 500 and G-150. The only Hawker 4000 competes against the Challenger 300, Citation X, Falcon 2000, Gulf-280, 350 & 450 and Legacy 600 in the hot super-mid size category. So for the HB to compete they would have had to break out of the 700 series upgrades and clean sheet a series of new competitive birds in the Super lights and Super-mid Size where the market will grow. And as you didn’t mention, the cost for a single super mid-size development is north of $750 million. Management was fighting an impossible situation.
Brand is certainly about reputation, but what reputation. Apple’s brand isn’t about reliability and longivity of support as you suggest. Far from it. Apple is average in quality of hardware and obsoletes it’s hardware and operating systems every 2 to 3 years and quits supporting old systems within 5 or 7. It’s frustrating and expensive. But people still buy Apple products. Why? Because their reputation is about innovation. Business jet producers reputation and therefore brand are built on building and long term supporting reliable tried and true aircraft that incorporates incremental improvements that are great fits for segments of customers. That’s not Apple’s brand.
As for dropping warranty coverage for existing aircraft, that is a terrible and dishonorable decision. But the company is basically bankrupt and probably couldn’t provide the coverage and still protect their jewel, Beechcraft prop planes.
As to your questioning their focus on developing a single engine turboprop, where have you been the past ten years. Single engine piston planes, except for LSA’s and experimentals are not growing in volume. And won’t. Pilatus and TBM’s have multi-year backlogs with both in competition for a portion of the King Air users. Beechcraft knows turbo props and single engine air frames. Management has missed the mark with this direction. Far from it.
I don’t know the management of Hawker Beechcraft. I do know business. You should mourn the loss of the classic and antiquated 125 and follow-on jets, express outrage that a bankrupt company can’t continue warranty coverage and for payout of bonuses. But you should be honest and recognize that the die was cast for Hawker long ago and that although you would gladly have someone else invest a couple billion into developing a competitive “line” of new Hawker products, but that you personally don’t see room for another entrant into these categories. And above all, you should speak with data about the opportunities that market driven in the single engine turboprop area and how Beechcraft is such a great fit.
Bill Walter, your blog is excellent and it looks like you are a business owner who know how to run the company.
The Beech problem goes way back starting with Raytheon and others. The Company needs real turnaround executives who get paid on performances with a solid capital structure in place, we do that everytime.
Beech has a solid chance to survive as a free standing company with focus on the old King Airs’, Bonanza, Baron and Duke. Keep also in mind, that basicaly these planes have 40 year plus old bodies, the only items that have changed – avionics and better seats. Pricing is way out of control, you pay for a new King Air 90 the same money as for a Citation Jet and that’s the real problem for Beech their product got to expensive and had no change to survive because they had to cover the losses in the jet market with the turbo and piston planes.
The single engine turbo prop market is very small and the 2 majors who fight in that segment can only do it because they have a solid line for the military, I flew PC7’s and Aerospecial’s (now Socata)as a young LT. I owned one of the first TBM700’s in the US, a great plane for 2 to 3 people, way to small not a business plane like a King Air. Beech forget to enter this market for single engine turbo props, choop the pricing on the King Air’s and the TBM & Pilatus buyers will change over – we all like the sound of 2 props!
Good points you made here Bill. I was with you up to the brand part.
Sure Apple is about innovation and builds technology that becomes obsolete every few years, but so does Microsoft.
My point was that it’s a nightmare to get service on a Windows PC while on a Mac, service is a phone call away to someone I can actually understand.
But airplanes? You’re mixing apples and oranges.
Last time I checked it, folks can afford to buy a new iMac every four or five years because 2 grand is a heck of a lot easier to come by than $15 million for a jet. They call that amortization don’t they?
And to my point on the single engine turboprop, I do understand the market on that point. I see what people are building and buying.
When I said HBC would never build a single-engine turboprop, it wasn’t because I thought it was a bad product point. Hardly.
To your point about HBC’s bankruptcy … remember these folks are broke. They couldn’t deliver the Premier’s performance the first time around and the 4000 took more than a decade and they didn’t get that one right the first time either.
So if you think anyone in the industry believes that HBC can and will build a single-engine turboprop with the performance people want at a cost they can afford, then you’re about the only person who does.
Mr. Mark, let us probably agree that HBC has been an excellent example of an enterprise with highly recognizable brands, strength in execution in a limited number of those brands, a history of multiple owner/investors that undermined the ability of management to manage to and execute against the potential markets and an overall dedicated set of employees that were asked to deliver aircraft they were not experienced to do well nor efficiently. History and consultants would probably say that HBC “shoud’a stuck to their knitting”.
I would respectively suggest we both should have avoided using Apple as a brand comparison. Apples and Oranges as you say. I know I should have.
Last, you are correct in saying that a financially crippled company can’t afford to do much other than work it’s current Beechcraft offering to increase revenue, reduce costs and build reserves and credibility. I think I am correct and if I had said it better, that if there was a future investment, ah ….. gamble, to be made, the place to consider would be in the single engine turboprop. For there is viable, if not land rush demand and that the Beech position and experience in the under 12,500 lbs GW sized prop driven aircraft is strong.
Most of the posts here demonstrate a striking ignorance of why a company exists. They don’t exist to give you a job. They exist to satisfy a markets desire for a product and maximize the profits for the owners. It’s that simple. The fact that you get a job out of it is just an inconvenient reality of running a business. Why do you think the auto industry has so heavily invested in robots the past 30 years. Once GM had over 600,000 employees. Today they have 30,000.
I love flying Beechcraft aircraft and hope they survive. But they won’t do it with whiny complaining employees. Be thankful you have a job and if you don’t like it find another. Or better yet, start your own aircraft company and outdo Beech.
Good points again Bill.
IF I were going to bet on HBC gambling somewhere, I’d say their best chance is with a single-engine turboprop.
The question though is whether one — anyone will help them finance that venture, two — whether they can actually pull it off before they get their tails kicked by the likes of the Pilatus, TBM and Kestrel (when it flies)and three — whether folks who just watched what HBC did to their jet customers by destroying the warranties would trust the company again.
And that trust issue now that we’ve watched how HBC plays the game is the item I’d be more more concerned about in this gamble than anything else if I were an investor.
Frank, Frank, Frank.
Just because we didn’t specifically address the issue of the business itself doesn’t mean we’re ignorant of how the game is played.
The discussion began around the idea that HBC has severely damaged their brand.
How they deal with employees is another post entirely I think.
But certainly you are correct that in a right to work state, employees are free to come and go and employers can handle them the same way.
Whether you like it or not though, the employees at HBC long ago chose to be members of the International Association of Machinists.
The company needs to abide by the agreement they signed unless they can renegotiate something better … or like the airlines do in bankruptcy, simply pretend those agreements no longer exist and move on from there.